Charles Arlinghaus: NH budget should be fixed, not punted

New Hampshire's budget experiences the greatest difficulty when short-term fixes solve nothing and merely delay decisions by creating a bigger hole for future legislatures to fix. A budget based on gimmicks and one-time unusual events does nothing to solve anything.

Every New Hampshire budget requires some decisions about which programs can be afforded with existing revenues and which must be curtailed. The weighing of competing options is the whole point of a budget. Programs are never evaluated in and of themselves. Instead, they are weighed against competing alternatives and the resources available.

This decision-making process is difficult. Most legislators find themselves wishing they had more resources so they could say yes to more people. Inevitably, someone will come up with a proposal that isn't sensible, but is attractive simply because it delays a difficult decision.

In the budgets of 2007 and 2009, the gimmicks that delayed the day of reckoning included borrowing money. Rather than paying the bills, for example, the Legislature borrowed the money to pay the bills for previously borrowed money. It gave lawmakers room for the year, and the payments became the problem of future legislators.

A massive explosion of debt - we increased the state's debt in four years by the same amount as the previous 20 - made life easier in one budget and hard for the 20 years that will follow. Debt service payments today are 30 percent higher than they were 10 years ago (even though the general fund budget is about the same). Those payments leave less money for everything else.

The second big problem is one-time revenues. For example, the 2009 budget paid for ongoing expenses with $167 million of one-time stimulus money. While the money temporarily plugged the budget and made life easier for that one year, it created a giant hole for someone else to fix.

Put it all together and the 2011 budget was a nightmare to fix, and it later required a 10 percent budget cut.

Already, some politicians are lining up to repeat the mistakes of the past. First on the list is the contradictory treatment of gambling revenues. The governor's budget and the Senate-passed gambling bill would allow gambling revenues in the coming biennium (largely from one-time franchise fees) to be used as general operating revenue. Then, the ongoing gambling taxes starting in the budget after that would be dedicated.

To use the $80 million franchise fee in this budget would then create an $80 million hole for someone else to fix later. Whether you support a casino or not, you don't want it to create a fiscal problem. The revenue should all be dedicated or all be for general use.

Another problem is the use of dedicated funds and lawsuit money. The House-passed budget would raid funds that are dedicated to specific purposes and use them for general purposes. The House did this so it could rely on some money from a tobacco lawsuit for a one-time cash infusion. In truth, neither should be used.

Whether raiding a dedicated fund is legal or not, it uses a one-time source to pay for ongoing expenses, which kicks the problem down the road. Similarly, lawsuits, whether related to tobacco or the MTBE settlement, can't be counted on to supply ongoing revenues.

The operating ethic of Washington is to delay decisions, borrow money and hope that some future people will discover a magic solution. Washington's budget is never balanced, and our grandchildren suffer for it.

The Washington ethic must not become the Concord ethic. The temptation to delay is human nature. When someone dangles a solution that makes your life easier at the expense of some nameless person in the future, it's hard to say no. But it's important to say no.

If we deal with the problem today, it's smaller and more manageable. To kick it down the road makes it progressively larger and more divisive, and the decisions that have to be made later more painful.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.